Advancing the pathway towards natural capital based assessment for industrial and financial sectors

The relationship between nature and industry has been constantly contested for decades, regardless of the warning on the Earth as transformed by human action (Turner, B. L., et al., 1993) which address the unprecedented changes in the biosphere that have taken place over the last 300 years. Accumulation of the human impacts has also led to the degradation of the atmosphere resulting in anthropogenic warming that have brought tremendous threats to societies. While standing at the tipping point, international societies have made substantive advancement to push industrial and financial sectors taking responsibility in carbon accounting and climate risk assessment (i.e., TCFD). The relationship between climate and industry is complex, but the threat from both of them on biodiversity and natural capital (NC) loss is even devastating. In 2021, the initiative of Taskforce on Nature-related Financial Disclosures (TNFD) was launched and the TNFD Recommendations and Guidance is released in 2023. With a broader focus on the industrial and financial sector dependence and impact on the NC, TNFD contains a big range of ambiguity in developing methodology. Meanwhile, climate risk is regarded as a driving force of ecosystem change in the assessment. How to access relevant data, in suitable spatial and temporal resolution, to quantify the NC related dependency and risk becomes the most fundamental challenge before tipping elements and tipping interactions can be identified to facilitate a social and industrial transformation. 

This study collaborates with a listed high-tech company in Taiwan to assess the relationship between its value chain and NC following the LEAP approach. We have developed a high-spatial-resolution database to identify the dependencies and impacts on NC across different operational locations. Meanwhile, we conduct materiality assessments through internal questionnaires, examining the significance of different types of NC to business operations from the perspectives of Consequences rating and Likelihood rating. Finally, we aim to establish TNFD risk matrices by integrating the assessment results from spatial and materiality assessments, with the hope of helping enterprises to identify NC requiring immediate attention and action.

Overall, the integrated TNFD assessment method combining spatial and materiality analyses serve as tipping elements between enterprises and NC; it may help enterprises systematically quantify their dependencies and impacts on NC, thereby identifying operational locations and types of NC that require priority action. Meanwhile, high-resolution spatial databases can support enterprises in defining the locations, scope, and even causes of NC issues, which in turn can help identify key external stakeholders and initiate new engagements. This integrated assessment approach has the potential to address the methodological gaps in TNFD development and to provide a concrete empirical foundation for business operational transformation, helping enterprises to develop early adaptation and response strategies when facing global ecosystem changes.